Tory minister says fraud in government is rampant after ‘dramatic’ resignation

Lord Agnew (second from left) outside 11 Downing Street

A Tory minister who quit in what has been described as “one of the most dramatic moments ever seen” in the House of Lords has claimed that fraud is rampant in the British government.

Lord Agnew of Oulton had been the minister for efficiency and transformation before announcing his resignation at the despatch box and marching out of the chamber on Monday.

In his exit speech, the Tory peer criticised his party’s “schoolboy” handling of fraudulent Covid business loans.

In a subsequent op-ed in the Financial Times, Lord Agnew said that the government had “failed spectacularly” for allowing dysfunctionality to continue on such a colossal scale.

The former minister wrote of his “slightly controversial” exit: “The failure of government in tackling fraud is, I believe, so egregious and the need for remedy so urgent that, in the end, I felt the only option was to smash some crockery to get people to take notice.

“Fraud in government is rampant. Public estimates sit at just under £30bn (€35.7 billion) a year. There is a complete lack of focus on the cost to society, or indeed the taxpayer.

“The rapid roll out of the government’s bounce-back loan scheme was an important and successful intervention to protect the productive capacity of our economy in the worst peacetime crisis since the second world war.

“But the cack-handed implementation and catastrophic follow-through is costing us probably hundreds of millions of pounds a month.”

Lord Agnew went on to say that he had repeatedly tried as the minister for counter-fraud to “bring some focus to this issue” but had reached his breaking point, citing the British Business Bank and department for business, energy and industrial strategy’s (BEIS) “lack of grip” over syndicate banks.

“The reason I have decided to speak out now is that there is still time to instil some discipline to avert even more loss,” he said.

“The failure is not just political. The government machine has failed spectacularly both in the business department in its weak oversight of the British Business Bank and in the Treasury for allowing such dysfunctionality to continue on such a colossal scale (£47bn of bounce back loans have been advanced).”

Lord Agnew further stated that one of the ways which government could have fixed the “rampant fraud” – with an economic crime bill to fill the regulatory gaps – was “foolishly rejected last week as a candidate bill for the next parliamentary session”.

The outgoing minister concluded by saying: “If my departure and bid for pariah status moves the machine to action, it will have been worth it”.

Earlier on Monday, Lord Agnew surprised the House of Lords when he was asked to appear before peers to provide an update on the £4.3 billion of Covid loans which the Treasury had written off.

The former minister instead criticised the “woeful” oversight of the bounce back loans by BEIS and the British Business Bank of the panel lenders, adding: “They have been assisted by the Treasury, who appear to have no knowledge or little interest in the consequences of fraud to our economy or our society.”

The Conservative peer said BEIS had “two counter-fraud staff” at the start of the pandemic who would not “engage constructively” with his counter-fraud team in the cabinet office.

He went on: “Schoolboy errors were made, for example allowing over 1,000 companies to receive bounce back loans that were not even trading when Covid struck.”

Lord Agnew said he had been “arguing” with Treasury and BEIS officials for nearly two years to “get them to lift their game”, adding: “I have been mostly unsuccessful.”

He said: “Given that I am the minister for counter-fraud, it would be somewhat dishonest to stay on in that role if I am incapable of doing it properly, let alone defending our track record.

“It is for this reason that I have sadly decided to tender my resignation as a minister across the Treasury and cabinet office with immediate effect.”

He told peers: “I hope that as a virtually unknown minister beyond this place, giving up my career might prompt others more important than me to get behind this and sort it out.

“It matters for all the obvious reasons, but there’s a penny of income tax waiting to be claimed if we just woke up.

“Total fraud loss across government is estimated at £29 billion a year. Of course not all can be stopped but a combination of arrogance, indolence and ignorance freezes the Government machine.

“Action taken today would give this government a sporting chance of cutting income tax before a likely May 2024 election.

“If my removal helps that to happen, it’d have been worth it.”

Labour leader in the Lords, Baroness Smith of Basildon, said: “I think we have just witnessed one of the most dramatic moments we have ever seen in the House from a minister who felt his integrity could no longer ensure he remained a member of the government.”

The British prime minister’s official spokesman said: “On the wider issues that he’s raised, we introduced our unprecedented Covid support schemes at speed to protect jobs and livelihoods, helping millions of people across the UK, including nearly 12 million on the furlough scheme alone.

“We’ve always been clear fraud is unacceptable and are taking action against those abusing the system, with 150,000 ineligible claims blocked, £500 million recovered last year and the HMRC tax protection taskforce is expected to recover an additional £1 billion of taxpayers’ money.”